Early premarket gappersGapping up:
- ANAB +7.7%, ECR +6.2%, RHT +4.5%, MKC +3.8%, GGP +3.3%, PTGX +2.6%, QTNT +2.2%, EKSO +1.9%, BHVN +1.3%, TVPT +1.2%, CC +1.1%, WBAI +1%
Gapping down:
- LFIN -17.6%, OSTK -9.5%, LAND -7.9%, NVTA -6.4%, GERN -5.2%, LMRK -3.3%, AUPH -3.3%, MGNX -3%, MMP -2.8%, PUMP -2.1%, HOME -1.9%, BFAM -1.6%, BPY -1%, GIS -0.7%
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AMAZON.COM AND FRENCH RETAILER CASINO ARE NEGOTIATING “SOME KIND OF PARTNERSHIP” IN BRAZIL INVOLVING VIA VAREJO -NEWSPAPER O GLOBO
BE12:28 pm
This is Zurich Insurance, to be clear. Market cap of $45bn or so .......
BE12:28 pm
.... which makes the gains worth investigation.
BE12:29 pm
.... and so far, we haven't turned over much.
BE12:30 pm
What we can say is that, if there's a bid involved here, it'd be huge .... As in, second or third biggest M&A transaction ever.
BE12:30 pm
IF ....
BE12:31 pm
And if there's a bid involved here, the number of interested parties is pretty limited.
BE12:31 pm
Allianz? Or something Buffett related? Or something Chinese? Dunno.
BE
Anyway, all we can say right now is that a lot of savvy people are taking an unusual interest in Zurich Insurance. We don't know why, but we'll try to tell you as soon as we do.
House prices falling in two-fifths of London postcodes
New data on capital’s housing market show values under most pressure in the centre
House prices are falling in two out of five London postcodes, according to research that underlines the growing divergence between prices in southern English cities and those elsewhere in the UK.
The average annual rate of price growth in the capital has slowed to 1 per cent, down sharply from 4.3 per cent a year ago, meaning it is at its lowest level since August 2011, according to research by Hometrack, a housing market analyst. This stands in contrast to UK-wide average house price growth of 5.2 per cent in the year to February 2018, up from 4 per cent a year ago.
Richard Donnell, Hometrack research director, said that London — where the average price of a home is £487,900 — had experienced a number of “stages” in its housing market cycle. Following a period of “meteoric” house price rises, the capital has experienced an initial fall in transactions.
“This is part of a repricing process that is going to be drawn out,” he said. “First to react is turnover [the number of transactions]. Then it’s asking prices. Then finally it hits underlying prices.”
Prices are under greatest pressure in central London, where owners of the most expensive types of property began cutting prices in 2015 responding to the impact of higher taxes. In the past year, however, the trend has deepened in areas beyond the prime zones of Westminster and Kensington & Chelsea. The boroughs that saw the greatest drop in value were the City of London, Camden, Southwark, Islington and Wandsworth, according to Hometrack’s research.
The data included Greater London postcodes, as well as adjacent commuter areas such as Watford and Dartford.
Further disparities between sub-markets in the capital emerged when looking at “time to sell”. Property transactions in inner London are now taking nearly 18 weeks from start to finish on average, compared with about 11 weeks for outer London and commuter towns. Until early 2015, there had been no material difference on this measure.
Hometrack is predicting that the number of areas of the capital experiencing falling house prices will multiply during this year as trapped sellers reduce their asking prices to drive through transactions. “The net result will be a negative rate of headline price growth for London by the middle of 2018,” the research said.
As new regulations and tax rises have been introduced to constrain activity in the buy-to-let market and limit mortgage borrowing, speculative buyers have turned away from investing in London property. The loss of these discretionary buyers has left the capital more reliant on domestic UK buyers — but the latter face affordability pressures under tighter lending constraints and high prices.
Outside southern England, house prices are more likely to be rising, in some places at a substantial pace. Edinburgh, Liverpool, Leicester, Birmingham and Manchester are adding more than 7 per cent a year to their average house price, Hometrack found, with Leeds, Nottingham and Sheffield pegging rises of 6 per cent or more.
The laggards in the 20-city index were Aberdeen (down by 7.7 per cent), Cambridge (down by 1.5 per cent) and Oxford (up by just 0.5 per cent). “Cambridge is performing like an extension of the London housing market,” Hometrack said.
Axa chief defends controversial XL Group deal
Thomas Buberl vows to convince investors over €12.4bn acquisition
The chief executive of French insurer Axa has admitted that it may take more than a year to convince investors that his €12.4bn acquisition of Bermuda’s XL Group is a positive move.
Thomas Buberl told the Financial Times that he understood investors’ concerns about what he described as a “strategic decision”.
When the French insurer announced the deal earlier this month its share price fell by a tenth, wiping almost €6bn off its market capitalisation. Its share price has struggled to recover since.
James Shuck, analyst at Citi, said the deal “looks expensive, increases earnings volatility, . . . raises financial risk and undermines management credibility”.
Some investors had expected the company to use the capital generated by the planned listing of its US business to fund small acquisitions of €1bn-€3bn and share buybacks, rather than to do big deals.
Mr Buberl said: “I understand the disappointment of investors from two perspectives. Despite the fact that I have always positioned share buybacks as the last option, a lot of investors thought [there would be] share buybacks.”
He added: “On the deal size we did indicate that we were looking at smaller deals and when we indicated that . . . we clearly did not have XL in mind. It was a year or more ago. But when your ideal hits the reality, you sometimes have to take a strategic decision.”
Mr Buberl said he would eventually convince investors that the deal was worthwhile: “Talking people around is difficult. You need to prove people around. It’s probably 12-18 months . . . When we spoke about this deal, it was clear that the market would not react positively.”
Mr Shuck said the deal was “such a significant turnaround in previous communication that we think it will take a long time to rebuild trust”.
However, Mr Buberl said the acquisition — one of half a dozen that was under consideration — was in line with Axa’s strategy to expand its property and casualty insurance business, and was not expensive when compared with the valuations of rival companies.
XL boosts Axa’s presence in commercial insurance, especially in the US, and in reinsurance. Those strengths are particularly important for Mr Buberl, who sees a big change coming in the way insurance works.
“Many risks will move from an individual, frequency-based risk to a commercial, more severity-based risk,” he said. “Take autonomous vehicles. Today, a car [insurance] contract is your personal contract . . . Tomorrow, it will be a manufacturer’s product liability, maybe focused on cyber risks.”
Analysts have cautioned of pressure on the group to complete the US initial public offering and other disposals in order to push through the deal without drawing down a €9bn bridging loan.
“The fact that Axa has committed funds from the IPO to the acquisition of XL may put pressure on price levels the group will be able to achieve in the IPO,” said analysts at Keefe, Bruyette & Woods.
“It is at least conceivable that Axa will need to re-think the IPO if price levels drop to economically untenable levels, and be forced to draw down portions of the bridging loan,” added the analysts, who suggested the insurer’s share price could fall further if such risks were realised.
Mr Buberl emphasised that, although he plans to use proceeds from the US listing to fund the XL acquisition, the two transactions are completely separate. If the IPO were to hit a snag Axa would fund the XL deal in other ways, without resorting to a capital increase, he said.
“I can sell companies, it is in my control whether I sell four companies this year or one,” he said. “I can decide how I run a life business, with more or with less capital. There are degrees of freedom that investors or analysts might not see.”
H&M profits drop 60% as fast-fashion chain cuts prices to shift stock
A fortnight after cautioning first quarter sales had fallen by around 1.5 per cent on last year, Swedish fashion group H&M laid out just how costly the first three months had been. Pre-tax profits were down 60 per cent from the same time a year ago, hit both by poor sales and higher markdowns.
“The rapid transformation of the fashion retail sector continues,” chief executive Karl-Johan Persson said. “The start of the year has been tough.”
The wrong mix of stock at its flagship brand necessitated “substantial clearance sales” while “unusually cold winter weather” stopped shoppers from freshening up their wardrobes for spring.
Pre-tax profits slumped to SKr1.3bn (€130m) from SKr3.2bn a year ago. Gross margin slipped from 52.1 per cent in the first quarter of 2017 to 49.9 per cent.
Stocks in Asia followed their U.S. counterparts higher on signs that an escalation of trade tensions was beginning to ease. The yen slipped and the South Korean won rallied as news emerged of a surprise visit to China by North Korea’s leader. Japan’s benchmarks gained at least 2 percent, while U.S. equity futures built on a Monday rally that saw the S&P 500 Index post its biggest one-day jump since August 2015. The won was the best performer among Asian emerging-market currencies as Kim Jong Un was said to be making an unannounced visitto Beijing, his first known trip outside North Korea since taking power in 2011. The yen was lower as risk-on sentiment returned.
Nikkei +2.43% Hang Seng +0.87% CSI +0.53% Shanghai +0.74% Shenzen +1.89%
Eur$ 1.2452 CNH 6.2504 CNY 6.2597 JPY 105.61 GBP 1.4228 CHF 0.9444 RUB 57.17 WTI$ 65.66 +0.17%
S&P +0.44% EuroStoxx +1.54% FTSE +1.29% Dax +1.83% SMI +1.69%
Macro :
- JPMorgan Says Buy U.S. Equities, Tariff Selloff Was ‘Irrational’
- One Strong Bounce Does Not a Bull Market Make: Macro View
- ECB Said to Have Raised Concern Banks Could Mask Losses for 2017
Keep an eye on :
- AKZA NA : AkzoNobel to Hand Most of Chemical Sale Proceeds to Investors
- APH LN : Alliance Pharma Open to More Deals This Year; FY Rev. Up 6%
- AAPL US : Apple Assembler Pegatron Says Can Move Output to U.S., Europe
- BALN SW : Baloise Full Year Profit 1.5% Below Estimates
- CAI AV : CA Immo Proposes Dividend Increase by 23% to EU0.8/Share
- CO FP : France’s Monoprix to Sell Products on Amazon
- FDR FP : Fonciere Des Regions Seeks to Buy Hotels in U.K. From Starwood
- GSK LN : Glaxo to Start Strategic Review of Horlicks, India Unit Stake
- GSK LN : Novartis Sells Consumer Health Stake to GSK for $13b Cash
- HMB SS : H&M Sees More Markdowns in 2Q vs Year Earlier
- INGA NA : ING Nearing Australia Customer Growth ‘Tipping Point’
- INH GY : Indus Holding Sees Full Year Ebit EU154 Mln To EU160 Mln
- MOSB LN : Moss Bros Proposes to Cut Total Dividend for Year By 32%
- NDX1 GY : Nordex Sees Full Year Revenue EU2.4 Bln To EU2.6 Bln
- NOVN VX : Novartis Sells Consumer Health Stake to GSK for $13b Cash
- UG FP : PSA Is Said to Have Put Its 25% Gefco Stake Up for Sale: Echos
- SGC LN : Stagecoach: FY Adj. EPS Expectations Haven’t Changed vs Interim
- SQ US : Square Jumps as Much as 3.5%, Put Options Active on Block Trade
- SMHN GY : Suess MicroTec Sees Full Year Sales EU195 Mln To EU205 Mln
- UU/ LN : United Utilities Says Trading Is in Line With Expectations
- VIFN SW : Vifor Pharma Grants Zeria Veltassa Licensing Rights in Japan
- VNA GY : Vonovia Says Aggregate Stake in Buwog Totals 74.19%
- VOW3 GY : VW CFO Says Cost Discipline Critical to Finance Push Into E-Cars
>>> Up
* DNO Upgraded to Sector Perform at RBC; PT 13 Kroner
* Genmab Upgraded to Buy at Berenberg
* Jacquet Metal Service Upgraded to Buy at SocGen; PT 32 Euros
* Unieuro Upgraded to Outperform at MedioBanca
>>> Down
* 4imprint Downgraded to Sell at Berenberg
* Ageas Downgraded to Neutral at JPMorgan; PT 46.15 Euros
* JOST Werke Downgraded to Neutral at JPMorgan; PT 45 Euros
* Metro AG Downgraded to Market Perform at Raymond James
* Naturex Downgraded to Hold at Berenberg
* Outokumpu Downgraded to Hold at DNB Markets; PT 6.10 Euros
* Roche Downgraded to Underweight at Morgan Stanley; PT 230 Francs
* TLG Immobilien Downgraded to Hold at Kepler Cheuvreux
>>> Initiation
* *ALTICE USA INITIATED BY COWEN AT OUTPERFORM; $25 PT
* Arrowhead Pharma Rated New Buy at Jefferies; PT $10
* Entertainment One Resumed Overweight at JPMorgan; PT 3.67 Pounds
* Instone Real Estate Group BV Rated New Buy at Kepler Cheuvreux
* Jacquet Metal Service Rated New Buy at Portzamparc; PT 33 Euros
* Shire Rated New Outperform at MainFirst; PT 36 Pounds
* Trufin Rated New Outperform at Macquarie; PT 2.60 Pounds
>>> Call
>> Sector
* *U.S. TECHNOLOGY SECTOR UPGRADED TO NEUTRAL AT JPMORGAN
Closing Market Summary: Technology and Financials Lead Rebound EffortStocks rebounded on Monday, reclaiming around two fifths of last week's decline, with technology and financial shares leading the charge. The S&P 500 advanced 2.7% to 2658.55, the Dow Jones Industrial Average jumped 2.8% to 24202.60, the Nasdaq Composite climbed 3.3% to 7220.54, and the Russell 2000 rose 2.2% to 1543.72.
The market opened on a solidly higher note following a Sunday report from the Wall Street Journal that the U.S. and China have started negotiating to improve American access to Chinese markets -- which helped ease fears of a trade war in the shadow of last week's tariff announcement; President Trump announced last Thursday that the U.S. will impose tariffs of up to $60 billion on Chinese imports, an act that was followed by threats of retaliation from Beijing.
However, the positive energy soon faded following the opening bell and was replaced with a feeling of nervousness, as it looked like the market might roll over; within the first two hours of trading, the S&P 500 trimmed its opening gain of 1.8% to just 0.5%. Luckily for the bulls, the benchmark index reversed course around the 2600 mark and kept climbing through the closing bell. The major averages finished the session at their best marks of the day.
Each of the S&P 500's 11 sectors advanced on Monday, with gains ranging between 0.9% and 4.0%. The top-weighted technology (+4.0%) and financials (+3.2%) sectors provided leadership throughout the session, bouncing back from last week's highly disappointing performances. Within the tech space, Microsoft (MSFT 93.78, +6.60) soared 7.6% after Morgan Stanley raised its target price from $110 to $130 -- a new Street high. Chipmakers also outperformed, evidenced by the 4.2% increase in the PHLX Semiconductor Index, and Apple (AAPL 172.77, +7.83) jumped 4.8%.
Conversely, Facebook (FB 160.06, +0.67) held the tech space's gain in check, rising just 0.4%, after the Federal Trade Commission (FTC) confirmed that it has opened a non-public investigation into the company's privacy practices following the Cambridge Analytica data scandal. The social media giant was down as much as 6.5% on Monday, touching a nine-month low, before bouncing back.
In other corporate news, home improvement retailer Lowe's (LOW 89.30, +5.53) rallied 6.6% after announcing that its CEO, Robert Niblock, will retire after 13 years at the helm, and Finish Line (FINL 13.83, +3.28) spiked 31.1% after agreeing to be acquired by UK-based JD Sports Fashion for $13.50 per share in cash; that represents a premium of 28.0% from Friday's closing price. The total value of the deal is worth approximately $558 million.
The lightly-weighted utilities, consumer staples, telecom services, and real estate groups -- most of which are countercyclical -- were the worst-performing sectors on Monday, but still finished with gains between 0.9% and 1.4%. Meanwhile, the consumer discretionary sector (+2.9%) finished behind technology and financials at the top of the sector standings, led by internet retail giant Amazon (AMZN 1555.86, +60.30), which advanced 4.0%.
In the bond market, U.S. Treasuries ended Monday on a mostly lower note, pushing yields higher across the curve; the yield on the benchmark 10-yr Treasury note ticked up one basis point to 2.84%. The 2-yr yield advanced three basis points to 2.29% following a $30 billion 2-yr note auction that drew a high yield of 2.31% on a bid-to-cover of 2.91.
Investors did not receive any notable economic data on Monday, but will receive two reports -- the S&P Case-Shiller Home Price Index for January (consensus 6.3%) and the Conference Board's Consumer Confidence Index for March consensus 129.5) -- on Tuesday morning.
- Nasdaq Composite: +4.6% YTD
- S&P 500: -0.6% YTD
- Dow Jones Industrial Average: -2.1% YTD
- Russell 2000: +0.5% YTD